Let's do business! Banks are not lending! So says the media coverage and your business owner friend down the street. While this may be the perception out in the market place, I’ve always held to the premise that there is always a little truth in any perceived state of affairs. For my part I do believe that lending has tightened and that with the new regulatory pressures that banks are now going to be facing that this may hamper lending even further. I also think that the businesses that are still getting loans will encounter conditions they never had before such as higher scrutiny of their financials, guarantee requirements, collateral conditions and exclusions, stricter loan to value ratios, higher debt service coverage ratios, and other convents that a bank might place on the business looking for credit. Add to this that banks are doing what they can to preserve their capital. I’ve seen for myself business owners and professionals being asked to leave a bank; even if those folks are solid from a lending and banking standpoint. The reason for this is two-fold, first, a bank can enhance their capital standing by raising more of it or by freeing it up. If a bank can’t raise capital, which is getting very hard for banks to do these days, they can free it up by having loans pay off or by calling them due. That’s the reality for a lot of banks and their customers in the current state of the economy. So what to do? First, there are banks that are lending (hint hint). That being said, let me give you some secrets (more like insider insight) that banks are going to be looking at here in the future when it comes to lending. For this purpose of this blog post I’m going to have to assume a few things. First, I’m going to assume that we are dealing with an existing business and not a start-up; that’s a blog post for another day. Second, I’m going to assume that they have had credit in the past or were at one time credit worthy. Third, I’m going to assume that their business is not as profitable as it was a few years ago. Four, I’m going to assume there have been some issues that are giving the bank pause in wanting to re-issue credit or establish a new credit facility. So now that we have the ground rules let’s see what we can do. Please note that if there is an issue that I haven’t covered in my synopsis please drop me a line in the comment field on a certain issue that you’d like me to address as I’d be more than happy to do so. First, cash flow is kind and liquidity is queen. This maxim has always been a tenant in banking, but in today’s economy it holds additional bearing. A banker wants to be able to see that you have the means to pay back a loan. More than that they want to see that you have enough in the bank that if things were to tighten up you’d have cash to see things through. It doesn’t matter to your banker how much money is coming in the future if you don’t have enough money to pay your employees paychecks until your customers pay. Or pay your landlord when your investors come through in a couple of months. Banks know that your suppliers may not be willing to extend you credit any further and that you may not be able to purchase the goods you need in order to deliver to your customers. More businesses fail for lack of cash flow than for lack of profit. Here is the secret, a banker wants to know if your realistic in predicting your cash flow. Because most business owners tend to overestimate income and underestimate expenses. So if you are not schooled in your company’s cash flow cycles and needs that will make a bank run faster the Usain Bolt. Take time to understand your company’s cash flow. Every business is different and you may need to elicit the help of your accountant. The second secret of getting a bank loan is to know your numbers and make sure they are accurate and up to date. You put a banker’s heart at ease if you can produce an interim income statement at a moments notice. You’ll also gain favor by knowing answers to your banker’s questions. For example, if Accounts Receivable days have increased do you know why, what are you doing about it? If there is an adjustment on your corporate tax returns do you know what it was for? If sales trends for the company are negative what are you doing to turn them around and how are your adjusting your expenses to compensate. Unfortunately, a lot of business owners rely on their accountants and bookkeeper’s to know the answers to these questions, and while that’s not necessarily a bad thing there is a caution here. If the business has seen better days a banker will demand you become more involved in the finances of the company. Secret number three, be proactive! I can’t stress this enough, especially if the business is going through some difficult times. Bankers hate surprises and even if the news isn’t good you’ll help your situation if you proactively set a meeting with your banker to discuss the situation. Your banker is there as a resource, illicit his expertise and assistance if problems start to arise. Additionally, if a condition of the loan is annual, semi-annual, or quarterly financials don’t make your banker call you for them. You’ll earn huge brownie points if you deliver them to your banker on or before they are due. If you are looking to get a loan, bring your financials with you to the very first meeting. Here is a list of what a bank will typically ask for….. 1. Last three years of business tax returns. 2. Interim financials – Income Statement, Balance Sheet, Accounts Receivable Again, Accounts Payable Listing. 3. Last three years of personal tax returns for guarantors. 4. Personal financial statement for all guarantors. 5.
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Secrets To Getting A Business Loan!
2010 Research Agenda Aberdeen’s Global Supply Management (GSM) practice focuses on the alignment of organizations, processes, and solutions to identify, negotiate, organize, manage, and improve global supply, leading to best value performance in support of the strategic objectives of the business.
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2010 Global Supply Management Research
At the end of this month, we will publish our latest report covering the area of Accounts Payable Automation, or E-Payables. For this study, our focus is on the early stages of the procure-to-pay process, namely invoice receipt and approval workflow
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Why Accounts Payable Automation Matters
Aberdeen’s research into accounts payable automation is in full swing for 2010. April saw the publication of our latest foray into invoice receipt and approval workflow , and May ended with the release of Aberdeen’s most recent payments-focused benchmark
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Accounts Payable as Revenue Generator
If you’ve ever worried about how to pay your bills, then we can help you learn how to become better at managing the most important asset you own – CASH. Not knowing how to manage cash caused me four years of nightmares from having to deal with the IRS collection agents. Let me tell you, you do not want to have this problem! True Story It all started in 1978. Business was booming and we had outgrown our facility. So, we moved to a larger office/warehouse location
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Cash is King!
We’ve all heard the saying from the Oracle: “Be fearful when others are greedy, and greedy when others are fearful.” There certainly seems to be some truth to that. I’ve always been somewhat of a contrarian, and as such have seen a few cycles come and go over the last couple of decades, missing huge opportunities more than once.
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The Suspended Contrarian
“TARP, zero interest rates, trillion-dollar budget deficits, you name it, we’ve thrown anything we can at the system. That has been successful to a limited extent at stopping the bleeding, but it has not really allowed the patient to get up off the table and resume a normal life again.” –- Steve Roach, Morgan Stanley’s Asia chairman, in an article in The New York Observer . The end of the 2nd quarter proved that the rally in credit and the stock market has grown long in the tooth
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The Economy and Small Business Financing: Checking the Vital Signs
AN ERP package can streamline and automate an unlimited number of important functions such as accounts payable, accounts receivable, activity management, benefits administration, and billing, invoicing and cost tracking (for project-based businesses). With ERP, companies can also improve cash management, while manufacturing firms can practice more effective capacity planning and cost containment
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many of today’s most popular ERP applications
Excuse #9: Change is expensive. When I need to get an invoice approved, I just put it in the right department’s mailbox at the front desk. They usually pick it up in a few days and sign it
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Top 10 Excuses For Not Considering Document Management This Year: #9 Change is expensive.
The newest advice floating around the job discussion boards is: think outside the box. “Hmph,” I thought, “sounds like a cliche to me.” The stinky thing about that is that cliches frequently become cliches because they’re true.
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Renaissance woman looking for 65 new bosses, um, er, CLIENTS
Nancy, from sunburstsoftwaresolutions.com asked this question on LinkedIn . “Do you know of a good method for indicating or tracking that a vendor bill is approved for payment?” I did some research, and while that functionality is not directly in QuickBooks, the QuickBooks Document Management Center can be used for that purpose. Here’s how: Create a file named “Payment approved by xxxx”. Save it to the Document Management Service and then the approver can attach that document to each approved bill
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Tracking that a vendor bill is approved for payment
The new financial reform bill is supposed to prevent another credit crisis, but will there be unintended consequences for small business? Yes, quite a few, says an article today on Forbes.com , and many of them are bad: An increase in the capital gains tax will discourage investors from taking an equity stake in small businesses
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Forbes Outlines Potential Effects of Financial Reform Bill
By mid-July, Sage will make Product Update 2 available for version 4.4 of Sage MAS 90 and 200. Any customers who are on a current plan with their Sage maintenance agreement are eligible to receive the update. In an effort to provide additional features and benefits on a more timely basis than the traditional once-a-year upgrade, Sage is releasing Product Updates on a quarterly schedule. Each of these Product Updates will include both customer-requested features and select additions from the Extended Solutions catalog. The modules that are enhanced in this Product Update are Accounts Payable, Bank Reconciliation and Paperless Office. In addition a new utility is being added that will assist with identifying any data issues prior to the installation of the Product Update.
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Sage MAS 90 and 200 Product Update 2
Under Arahan Perbendaharaan 103 (AP 103), Head of Departments must ensure that bills are paid not later than fourteen (14) days from date of receipt. A register, called Daftar Bil (Kew 269) must be maintained and should have the following information: (1) Date of receipt of invoice/bill (2) Invoice/Bill amount (3) Date of payment voucher prepared (4) Acknowledgement date of receipt by Finance (5) Cheque Date In Century Financials, the Daftar Bil or Bill Register can be generated automatically by choosing the relevant selection options of the said report in the standard report options in the Accounts Payable module. A snapshot of the latest format is shown below. This is also available as Lampiran V (Page 155) in the Arahan Perbendaharaan booklet. ( click to download the Arahan Perbendaharaan booklet )
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Daftar Bil
The details of the financial regulation bill are still being ironed out, but whatever the final law looks like, it will likely affect credit markets across a broad spectrum, from individual consumer credit to small business lending. Among the new provisions in the law is a new consumer protection agency that will likely tamp down on certain mortgage and credit card practices
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Financial Regulation Bill Will Affect Small Business Financing
If you look at any commodity in the market, Demand is greater than Supply. Likewise, with the ever expanding universe of users, Data demand is outpacing Data supply. Though the enterprises are growing at a faster pace, they are unable to scale up their applications in a cost effective way.
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In Memory Data Grid solution for application objects using Oracle Coherence
Tom Harnish has an article on cash flow in American Express OPEN Forum, where he imagines a machine that would glow green or red according to a small business’s working capital position , and discusses steps business can take to “speed up cash coming in and slow down cash going out.” Harnish writes: Having more cash coming in is obviously good, but what’s perhaps not so obvious is that money owed to you — which is nice to have on the books — isn’t as nice to have as money in the bank. If you can find a way to start it coming in faster, it’s the same as opening the spigot. Sounds familiar
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Cash Flow Solutions for Small Businesses
Emily Maltby of the Wall Street Journal has a great article about the credit crunch, its various causes, and its effect on small business financing . It’s a very good summary of what’s happened to our economy in the past two and a half years with respect to tightening credit standards, and it asks some provocative questions: Are banks to blame for the precipitous drop in lending to small businesses, or are fewer small businesses even applying for loans for fear of getting turned down? Is the government sending mixed messages to banks, urging them to make prudent loans, but also to increase lending to small businesses
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Wall Street Journal on the Lingering Credit Crunch
At The Receivables Exchange we often talk about the “double credit crunch,” where small and midsize businesses (SMBs) are unable to get growth capital from banks, and at the same time their customers are taking longer to pay their invoices. SMBs are being squeezed from both sides, and their cash flow suffers. Anne Field has an interesting piece in American Express OPEN Forum that offers SMBs advice on how to deal with late-paying customers.
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Small Business Financing and the Double Credit Crunch
Today congressional democrats voted to pass a $30 billion government fund for possible lending to small businesses by community banks. I say possible because there is no mandate included in the measure…just the availability of funds if banks are interested. On a positive note, with bank leveraging, the loans could reach $300 billion. That would certainly have an impact on tight credit markets and would hopefully lower unemployment numbers accordingly. On a somewhat less positive note, so far the bailouts offered by our government supposedly for the benefit of small businesses haven’t trickled down. As a full service Accounting Firm , we deal with mostly small businesses. Most of them aren’t seeing the trickle down either. Folks around here are still struggling…and most other places too I suspect. I am thankful that at least our government is trying to do something. I just wish they would be mandated to learn from their mistakes like all the rest of us. I wish that market forces would require them to constantly review not only populist opinion, but whether they have been effective as leaders and whether their positions have benefitted those they serve… now that really is dreaming. If you happen to be a recipient of one of these small business loans from a community bank; please drop us a line. I love to hear positive news especially from other small businesses like ours. Staff – Inland Accounting Services www.inlandaccountingservices.com
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House Passes $30B Small Business Lending Fund